RV Loans: How To Finance An RV
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the RV arrow is undeniable.
For some, the pandemic and life in quarantine in early 2020 provided a final push to adopt a more nomadic lifestyle. For others, a life of adventure at a lower cost is too good a print to pass up.
Some people have even decided to hit the road full time, and a quick glance at the #RVLife hashtag on Instagram highlights the allure of a life on the road.
But novices tend to think of buying a motorhome the wrong way, says Brandi Stephens, founder of the blog. RVersity and YouTuber by the name of Bloggin Brandi. Stephens turned her own experience and website into a mission to help people learn how to get started in the RV life – she says she’s bought three RVs over the years since she started living mobile full time five years ago.
“I always say it’s like buying a house, but getting financing for a car,” Stephens says.
There are some notable differences between auto loans and RV loans, and nuances in the process that people with no experience might not understand. With so much variability in size and type, an RV can cost as little as $ 10,000 on one end and hundreds of thousands of dollars on the other, so it’s important to understand what you’re getting yourself into.
RV buying options: cash or finance
Even if you have enough cash to cover the price of the RV sticker, there are reasons you might want to consider financing anyway, as RV living comes with a multitude of costs. unexpected initials.
Dealer fees, warranties, and taxes are all factored into the final price. And some of those fees aren’t just a few hundred extra dollars. Stephens says she knows people who have ended up paying up to $ 30,000 in registration taxes on more expensive RV purchases.
No matter where you buy an RV, you’ll need to register it in the state you consider your primary residence (think: where you get your mail and file your taxes). “When I bought my RV out of state, I had to pay the taxes in Georgia to register it, and you don’t think about the taxes to register it and get your tag,” says Stephens. “On my last RV, I think it was $ 5,000.”
These fees can make a big difference when deciding whether or not to finance your RV.
“You might not want to pay for these things out of pocket because it’s your money, and you can use it to actually use the RV,” Stephens says. The costs of operating an RV can also be high, especially at the beginning.
Stephens estimates his monthly RV budget to be around $ 700, and depending on the month it could look like this:
- Gasoline: $ 150 to $ 200 to fill its 80-gallon tank, which will make it about 600 miles
- Propane: $ 60 to fill its 26-pound tank, which needs to be refilled more frequently during the colder months for the heat
- Water, electricity, sewer: around $ 30 per night for an advantageous price in a camper van park. Stephens currently pays $ 400 per month for an extended stay
- Electricity so Stephens can stay connected if not in an RV park: $ 40 to $ 150, and more expensive in the warmer months to run the air conditioning
- WiFi: $ 100 per month for its hotspot
Similar to the advice many first-time homebuyers get, Stephens says you should expect a new RV to have a year of unexpected spending on things as basic as the RV’s microwave. And in the same way as when you buy a new home, a warranty can help you by covering some of those day-to-day expenses of the first year, so you don’t have to pay them in full out of pocket when they arise, says. Stephens.
Aside from running costs, there are a lot of costs you’ll want to think about up front, like registration fees. Funding the cost of the RV can give you more space to accommodate them by freeing up your cash reserves if things go wrong. But depending on your situation and the type of RV you are purchasing, it may make more sense to pay up front.
NextAdvisor has reached out to four RV lenders who say the demand for RV loans has definitely increased this year. They also offered tips to make your approval process as smooth as possible.
First of all, an RV loan is the route you want to take when financing an RV purchase. Although they are similar to car loans, you cannot use a car loan for an RV purchase because the underlying collateral – the RV, in this case – is so different. And while many people use RVs as their primary residence, you also can’t get a mortgage for an RV.
You could potentially get a personal loan for an RV, but depending on the total cost of the RV, it might be difficult to get a personal loan with a sufficiently large loan amount, says Brian Sharapata, senior director of credit product strategy at Chicago-based Alliant Credit Union.
The main difference between an auto loan and an RV loan is the length of the terms – they can be up to 20 years in some cases for an RV loan. Most RV lenders also require a 10-20% down payment for an RV, but if you put more, you may qualify for a better rate due to a more favorable loan-to-value ratio.
Ask your lender if a shorter term will qualify you for a lower rate.
How To Qualify For An RV Loan
RV lenders look at several factors to determine your eligibility for an RV loan:
- Credit history and reports
- Payment history, especially for installment loans (like auto loans)
- The amount of your debt and your debt ratio
- Some require references
But even if you don’t have an outstanding credit history, that doesn’t mean you won’t qualify for an RV loan.
Assuming you weren’t “a habitual delinquent,” you might still qualify for a loan – though likely with a higher APR, says John Haymond, senior vice president of business development at Medallion Bank, a Salt Lake City, Utah bank that focuses on recreational vehicle financing.
A potential lender will likely review some or all of the following documents before approving you for a loan:
- Proof of income: W-2s, pay stubs, tax returns
- Proof of assets: investment account statements, 401 (k) statements, savings account statements
- Social security number (for a credit check)
If you are planning to purchase an RV in retirement, you will want to plan well in advance. “You might want to buy your RV before you retire,” Stephens says. “This way you can show proof of income and it will make the buying process easier.”
Choosing an RV Lender
Not all banks offer RV loans, but Stephens recommends starting with a bank you already have a good relationship with. Another option is to go to a dealer who can shop around for rates from various lenders. One of the advantages of dealers is that they will often factor trade-in into the final price.
“They’ll take trades for anything,” Stephens says. “I saw them take people’s cars, guns, grills. Some take antiques or whatever they think they can sell on their land. ”
Which lender you choose will also play a role in the rate you can get on an RV loan at the moment, but your personal financial situation, like your credit history and debt, will take more weight.
At the end of the line
Buying an RV is not as easy as buying a car, but if you have all the correct information you can make sure you get the best deal.
“It’s a great opportunity for people to get out there and enjoy the outdoors,” says Haymond. “And that provides a safe environment and a way to do it in the current pandemic situation.”